New payment solution helps SMEs resolve capital crunch

SINGAPORE — Small and medium enterprises (SMEs) will be able to receive payments faster through a virtual credit card solution which facilitates cash flow to businesses. Developed in partnership between credit card company Visa and FinTech developer Validus, the payment solution is the first of its kind in Singapore, and seeks to unlock capital for SMEs to reinvest in their products and services, according to a press statement by the two firms.

Through a “securities crowdfunding platform”, Validus works with Visa to facilitate immediate cash flow to SMEs who have unpaid invoices in their payment cycles. Using a risk algorithm, Validus evaluates the creditworthiness of the SME as well as its invoices, sidestepping banks and financial institutions. By going directly to investors who can decide on their risk appetite, the system matches lenders to SMEs.

“SMEs don’t have hard collateral, but what they do have is a track record and a history of working with their vendors,” Mr Nikhilesh Goel, chief operating officer of Validus told TODAY.

Through the online marketplace, investors, including high net worth individuals and family offices, can decide whether to provide the capital upfront to the SME, based on the risk assessment and innovative technology provided by Validus and Visa.

Investors must be accredited, and under Singapore law, an accredited investor is a person who has more than S$2 million in personal assets including property, or made at least S$300,000 of income in the preceding 12 months.

“By clearing invoices for SMEs using a Visa virtual commercial card, Validus helps SMEs expand faster and have a faster turnover for their products and services,” said Mr Goel.

Typically, high-growth local companies with at least three years of track record would be applicable for the financing solution. SMEs in the food and beverage business which have to deal with large numbers of buyers would find the service useful, as would distributors of consumer durables and service providers, said Mr Goel.

Homegrowth GroXers Inc, which has an online grocery website with more than 2,000 products, has used the financing solution for its business for the past few months, and is now considering extending it to its other business units.

Ms Nichol Ng, owner of GroXers, stated that the solution has freed up the company’s cash flows considerably.

“At GroXers Inc, 100 per cent of our receivables from B2B retailers are now on credit card payment. We genuinely feel that in today’s economy, we should free our time and cash flow to focus on growing our business,” said Ms Ng, who is also Managing Director of GroXers Inc’s sister companies FoodXervices, PlotX, LogiXtics and X Properties.

Validus also facilitates the tracking and management of invoice repayments via a sophisticated tech solution as opposed to the traditional manual approach, which is time-consuming and prone to error. This is enabled by Visa’s commercial card solution and the fintech solution that Validus provides. This programme is part of Visa’s ongoing efforts to support SMEs in Singapore and across the world.

According to Mr Vikram Kshettry, Head for B2B Partnerships and Small Business Asia Pacific at Visa, “Small businesses often face challenges such as access to capital to fund their business growth and this makes them vulnerable. Similarly, suppliers for these businesses may be challenged to provide adequate credit, as they do not have the skills to underwrite higher credit lines.”

“It is essential that businesses are able to access credit from specialist lenders to invest in their businesses, and for suppliers to be paid on time. The presence of such lenders, who can respond faster to business needs, is key to Singapore’s continued SME growth.”